Perhaps you have now decided to begin investing your savings in the stock market, (or share market)but are not sure of the best strategy to use to make the best use of your funds. The stock market is a volatile market and is often in the news for losing peoples money, but less often is it reported for making people money. By using the correct strategies and having the right knowledge it is possible to make very good returns, and not put all your savings at risk. There is a lot more to investing in the stock market than simply buying stocks and waiting for them to go up in value.In this article we will look at various strategies for wealth creation and income generation in the stock market.
Income can be created in the stock market using many different methods, and there are many different courses and seminars in the market to teach you these methods. However you need to be cautious, there is lots of great information available, but also lots of not so great information. There are many expensive courses out there, but you need to be sure that the people teaching have learned how to do it for themselves. So if you are looking in the market to choose an education program, do some research before purchasing. Find out if other people have had success using the strategies being taught.The number of alternative ways to make money in the stockmarket is growing all the time due to the new products and derivatives which seem to regularly appear. This can make things very confusing for the new investor, but there are some very good books and free infometion available to get an overview of the basics so that your initial research needn't cost very much. Choosing the correct strategy to use also means assessing your time available to watch the market, some strategies require hours every day, where as others only require a quick monitor daily and maybe an hour once a month.There are also differences in the type of account you will need, either online where you do everything yourself, and these are very low cost, or the total opposite which is a full service broker who you will speak to on the phone before placing orders.
Here are a couple of examples of different methods that I like to use to generate cash flow. The first is using options using a "spread" where the cost of taking the position is quite low in relation to the potential reward. as an example, it could cost $500 to put on the position, with a profit potential of $2000. I can monitor this daily, and if I feel it is going against me, can exit without losing all my initial outlay.If it goes my way, I can close once it reaches my target and take my profit and any risk off the table.This may happen fairly quickly, sometimes within a few days.
The next example is a strategy I refer to as share renting, or covered calls. This requires more capital to make a decent dollar return, as the percentage return is lower. However the risk is also lower, and less stressful. This involves buying shares and then writing a call option against them, which then puts money in your account as soon as you sell the option.By the end of the month you may be exercised on your shares for a possible return of around 5 to 10%.
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